The first respondents (195 workers) were employed by the appellant municipality over two employment periods as part of a job creation programme called the Lungile Mtshali Community Development Plan Project. The first employment period (March 2014 - June 2015) was governed by two fixed-term contracts where workers signed directly with the municipality and were paid R2000 per month to perform cleaning work (streets, drains, parks, stadiums). On 30 June 2015, when the second contract expired, workers were turned away and prevented from working. The second employment period (December 2015 - August 2016) involved a third fixed-term contract between the workers, a private company Hlaniki Investment Holding (Pty) Ltd, and Gauteng Enterprise Propeller (GEP). The municipality was not a party to this contract. Hlaniki was engaged to manage the job creation programme (60% theoretical training, 40% practical), but the training was superficial and workers continued doing cleaning work. GEP paid salaries under this contract. The workers referred two disputes to the bargaining council: (1) whether they were permanently employed under section 198A of the LRA during the first period, and (2) whether they were deemed permanent employees when the third contract expired.
1. The appeal is upheld. 2. The cross-appeal is dismissed. 3. The order of the court a quo is set aside and replaced with: "The review application to set aside the arbitration award is dismissed". 4. There is no costs order in respect of the appeal and the cross-appeal. The practical effect is that the arbitrator's original award stands: the workers were unfairly dismissed on 30 June 2015 and are entitled to 3 months' compensation (not 12 months), but were not deemed permanent employees during the second employment period.
1. A court on review may only interfere with an arbitrator's compensation award under section 194(1) of the LRA on narrow grounds: where the arbitrator exercised discretion capriciously, upon wrong principles, with bias, without reason, or adopted a wrong approach. Absent such grounds, the court has no power to interfere with quantum. 2. A fixed-term employment contract exceeding 3 months is deemed to be of indefinite duration under section 198B(5) of the LRA where: (a) the nature of work is not of limited or definite duration (s198B(3)(a)); and (b) the employer cannot demonstrate any other justifiable reason for fixing the term (s198B(4)(g)). 3. Work that is ongoing in nature (such as cleaning municipal facilities) is not work "of a limited or definite duration" for purposes of section 198B(3)(a). 4. For section 198A(3)(b) to apply and deem employees to be employed by a client, there must exist a tripartite relationship between employees, a temporary employment service (TES), and a client. 5. An entity is not a TES merely because it failed to perform its contractual obligations as a project manager. A TES is an entity that procures or provides workers to a client for a reward—this is determined by the substance of the relationship, but clear contractual arrangements cannot be disregarded without evidence of a disguised employment relationship.
The court expressed sympathy for the first respondents' plight, noting that Hlaniki "dismally failed" to perform its role as contract manager despite being paid substantial amounts of taxpayers' money. The court observed that "the first respondents should have been upskilled and either employable or part of co-operatives or SMMES, which is not the case." This suggests the court recognized the programme's failure but found this insufficient to transform the legal characterization of the relationships. The court also commented that the job creation programme "degenerated into a shambles," acknowledging the practical failure of the initiative even while upholding the legal distinctions between the contractual arrangements. The court noted it was "unfortunate" that the workers did not receive the intended benefits of the training programme, but this policy concern could not override the legal analysis of whether a TES relationship existed. The municipality's decision not to seek costs against the workers (who were legally aided) and the court's decision not to award costs reflects the court's recognition of the workers' vulnerable position and the public interest nature of the dispute.
This case is significant in South African labour law for several reasons: 1. It clarifies the limited scope for judicial review of arbitrators' compensation awards under section 194(1) of the LRA, reinforcing that courts may only interfere on narrow grounds (capriciousness, wrong principles, bias, lack of reason, wrong approach). 2. It provides guidance on the application of section 198B of the LRA regarding when fixed-term contracts exceeding 3 months are deemed to be of indefinite duration, particularly the test for whether work is "of a limited or definite duration" and what constitutes a "justifiable reason" for fixing the term. 3. It addresses the interpretation of section 198A(3)(b) regarding temporary employment services, clarifying that a tripartite relationship between employee, TES, and client must exist, and that the substance test has limits—courts cannot disregard clear contractual arrangements merely because a programme failed to achieve its objectives. 4. It demonstrates the court's reluctance to apply overly purposive interpretations that would disregard contractual reality in the absence of evidence of a disguised employment relationship. 5. It serves as a cautionary tale about municipal job creation programmes and the importance of proper contract structuring and programme implementation.